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The Dysfunctional American political establishment, already presiding over a very real fiscal crisis due to an economy totally dependent on structural mega-deficits, has most recently added a self-created fiscal crisis, with one third of all federal government workers laid off due to a government shutdown, and debt default for the U.S. Treasury rapidly approaching. At almost the last possible moment, it appears that Congress will approve a Senate-led compromise, which would allow the American government to, in effect, reopen for business, alongside an extension of the debt ceiling, currently set to reach the maximum allowable figure at present on October 17.

According to details thus far being reported, it appears that the deal likely to be approved by the U.S. Congress will allow the government to reopen through February 7, 2014 and debt default avoided for now by extending the borrowing limit, currently set at $16.7 trillion limit, through January 17, 2014. In other words, nothing is really resolved; all that is agreed on is to kick the proverbial can down the road for a few more weeks, when the next politically-manufactured fiscal crisis will occur. Wall Street, however, only thinks of the short-term, which is why the Dow Jones is soaring once more at this example of legislative “craftsmanship” by America’s inept politicians.

If Hillary Clinton runs for President of the United States in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.

It is the rating agency statement heard across the world, like the first cannon ball fired at Fort Sumter. One of the three iconic ratings agencies, Standard & Poor’s, sent panic waves through global financial market when it issued a statement on the U.S. fiscal situation, changing its previous outlook on the U.S. government’s finances from “stable” to “negative.” However one interprets the latest statement from Standard & Poor’s ( and many Washington cheerleaders claim that the statement is meaningless and America will never default on its debts), the reality is quite clear: not even the “late to the party” rating agencies that previously classified subprime mortgage-backed securities as AAA grade investments can ignore any longer the catastrophic fiscal trajectory of the United States.

In its statement, S&P indicates that if the fiscal crisis in the U.S. remain unresolved, within two years U.S. Treasuries will be downgraded. The statement acknowledges that the American political system is totally dysfunctional, and appears unable to craft a viable plan to restore fiscal sanity to America’s out of control federal government budget. Reading between the lines, and adding my own perspective ( see my report “Global Economic Forecast 2010-2015: Recession Into Depression”) it seems increasingly obvious that save for a miracle, the United States is headed for a fiscal train wreck of calamitous proportion, probably sooner rather than later.

In a recent interview with Bloomberg TV, Dr. Nouriel Roubini, one of the foremost economists monitoring the global financial and economic crisis, warns of grave dangers facing the public budgetary imbalance of the United States. “The fiscal problem is very serious. The bond vigilantes have not yet woken up in the U.S. in the way they have in the Eurozone. Unless the U.S. addresses this fiscal problem, we’re going to see a train wreck.”

Roubini in the past has supported the vast budget deficits of governments and monetary loosening of central banks as a painful but necessary measure by advanced economies to redress the damage resulting form the financial and economic collapse of 2008. Even then, he warned that there was no free lunch, and that policymakers would have to present a credible plan for withdrawing stimulus and monetary easing and curtailing their levels of public debt. Now, with a full-fledged sovereign debt crisis raging in Europe and the U.S. trapped with a structural mega-deficit, Roubini and other perceptive economists are clearly worried about the unsustainable budgetary imbalance of the U.S. federal government. Indeed, a day of reckoning is coming closer, with no cogent remedies on the horizon. It is becoming far more likely that a fiscal train wreck is a future destination for the U.S. economy, and that future may not be long delayed.

Only a few weeks ago, the cheerleaders from the financial community and Obama administration were preaching the gospel of “green shoots,” those supposedly subtle indicators that the U.S. recession was bottoming out , and a recovery was just around the corner. However, amid a flood of dire economic and financial news, not the least being the bad unemployment numbers for June, there is increasing talk in Washington that a second dose of deficit-driven stimulus spending will be required from Washington if the nation’s severe economic contraction is to be reversed.

Not surprisingly, the Republicans are already labelling President Obama’s economic recovery spending package a failure. They point out that Barack Obama’s economic team had envisioned the unemployment rate stabilizing at 8% during 2009, as the impact of nearly $800 billion in borrowed money being unleashed by the Federal government would arrest the free fall in employment numbers. The June statistics released by the Labor department reveal that nearly half a million Americans lost their jobs in June, a significantly higher number than was posted in the previous month, taking the official U3 unemployment rate to 9.5%. However, the disastrous economic performance of the George W. Bush administration, aided and abetted by a Congress under Republican domination for most of the previous president’s term of office, undercuts the credibility of the GOP’s criticism of the Obama administration on economic policy. Of far greater significance is that much of the criticism is now coming from the left-of-center of the Democratic Party.

Many neo-Keynesian economists were critical of the original Obama stimulus package for allegedly being too small. Their position was that the contraction brought on by the Global Economic Crisis required governments across the world, but especially in the United States, to borrow massively in order to compensate for the diminution in private sector economic activity. In a recent op-ed piece in The New York Time, economist Paul Krugman represented this point of view forcefully in labelling the current stimulus package as being totally inadequate, and emphasizing that a second stimulus spending bill of sizeable dimensions was essential if the U.S. was to avoid slipping into an even worse economic crisis. He drew parallels with the economic downturn that occurred in 1937, when the Roosevelt administration pulled back from New Deal pump-priming in order to bring the Federal budget back under control.

While the Obama administration has been hesitant thus far in committing to a second stimulus spending bill, the combination of growing calls for more deficit spending combined with political realities, namely the 2010 mid-term elections, will likely create accelerating momentum towards another so-called “economic recovery act.” No Democrat wants to run in 2010 with unemployment continuing to rise.

Putting aside political factors, is a second stimulus spending bill a wise course to follow? In my view the answer is no. Just as I disagreed with the wisdom of both the original $800 billion spending bill and the $700 billion TARP Wall Street bailout package of last fall, I fail to see how the at best short-term enhancement of certain economic indicators outweighs the massive liability of further damaging the already frail fiscal health of the country. The neo-Keynesian economists fail to understand that the United States no longer has the luxury of engaging in counter-cyclical economic policy when its bank balance is mired in red ink. The global bond market is already providing early warning signs that profligate borrowing needs on the part of the U.S. government are simply unsustainable in the long-run. Not only would another stimulus spending orgy probably not improve the nation’s long-term economic health; the further deterioration in the fiscal viability of the U.S. government will inevitably create its own negative feedback loop, further exacerbating the underlying weaknesses in the American economy.

The fiscal catastrophe underway in America’s largest state, California, should serve as a brightly-lit red warning lamp for the entire nation. Endless debt by the sovereign does not guarantee long-term economic equilibrium. It is a roadmap to financial and economic Armageddon.